With less than $5 to produce a barrel of oil, price crash can’t hit S’Arabia as Nigeria
Recent sustained drop in global prices of crude oil have once again, resurrected the economics of cost of crude oil production in Nigeria and beyond.
Recall that the former Minister of State, Petroleum Resources, Dr Ibe Kachukwu had assured Nigerians that under his leadership, cost of crude production will drop from $17 to $10 which never happened before he failed his reappointment test.
More than two years later, the current leadership at the Nigerian National Petroleum Corporation (NNPC) has again, expressed the same readiness to strategically put in place measures that would cut down the cost of crude oil production in Nigeria.
Just like Dr Kachukwu, the current management at NNPC led by the Group Managing Director, Mallam Mele Kyari has rehearsed the same set of promises from reducing cost of crude production to creating market for Nigeria’s crude and make Nigeria a choice destination for Foreign Direct Investment.
From his remarks at the Central Bank of Nigeria (CBN) RoundTable discussion in Abuja mid last week, it was clear that all the promises made by Dr Kachukwu failed as he (Mallam Kyari) revealed that at the moment the cost of crude oil production in the country is still within the range of $15 to $17 per barrel it was when Dr Kachukwu assured us.
Though NNPC boss agreed that some leaders in the Industry such as Saudi Arabia’s cost of production is between $4 and $5 per barrel, he did not give details of how Saudi Arabia was able to cut their cost of crude production which would have been very revealing to Nigerians.
No doubt, petroleum economists believe that due to the uncertainties of the global crude oil market, countries that produce at the cheapest price would remain in the market while jurisdiction with high cost of crude oil production would not be able to cope with the competing prices.
This is the reason why Saudi Arabia fought oil and gas corruption to a standstill and the result reflected in the massive drop in the cost of production.
The question for the Nigerian oil and gas industry is whether the country can fight the industry corruption which will reflect in amongst other things, in cutting down cost per barrel of crude oil.